Industry Letters

General Industry Letters

Mortgage Banking Letters

Amendments to Part 410 of the Superintendent’s Regulations Concerning New Surety Bond Requirement or Deposit of Assets and
Consultants who are Felons

December 29, 2003

To
the Institution Addressed:

Re: Amendments to Part 410 of the Superintendent’s Regulations Concerning New Surety Bond Requirement or Deposit of Assets and
Consultants who are Felons.

As a result of legislation
passed this year, a new bond requirement will be effective January 1, 2004
for mortgage brokers. Mortgage
brokers will now be required to have a surety bond or pledged assets of
between $10,000 and $100,000. The
Department has developed the following standard upon which the amount of
the required bond will be based. The
amount of the bond for mortgage brokers will be determined by the number
of New York Applications set forth on the Volume of Operations Report.
Registrants will have until July 1,2004 to supply evidence of the
surety bond or the pledge of assets.

The amount of the bond required shall be as follows:

Number of New
York Applications

Required
Amount of Surety Bond

600+

$100,000

300 - 599

$ 75,000

100- 299

$ 50,000

25 – 99

$ 25,000

0 - 24

$ 10,000

The
new legislation also adds “consultant” to the categories listed in
sections 592.2, 592-a.2 and 595. These
sections provide the bases upon which a Superintendent may refuse to issue
a license or registration or may suspend or revoke a license. Accordingly, the superintendent may refuse to issue a license or
registration or may suspend or revoke a license or registration if a
consultant is a felon.

The
term consultant shall mean an individual or entity involved in
advising or directing management, performing management functions, or
providing services to management of a licensed mortgage banker or
registered mortgage broker on matters relating to the operation of the
company, or an individual or entity that receives compensation, either
directly or indirectly, from the licensed or registered entity, for
advising potential applicants or borrowers with regard to the making of a
mortgage loan. An individual
or entity may be deemed a consultant regardless of whether that
person or entity is receiving compensation. Consultant shall not include:

an
individual who is a W-2 employee of a licensee or registrant; or

an
individual with a professional license issued by this state or another
state including, but not limited to, attorneys, accountants, real
estate agents and appraisers, provided that the services provided by
such individual to the licensee or registrant are the services for
which such individual has a professional license; or

an
individual who is employed by an entity that is regulated by any
local, state or federal regulatory agency; or

any
1099 independent contractor or other outside contractor that does not
provide mortgage related services.

The
term employee shall mean any individual performing a service for
either a mortgage broker, or mortgage banker for whom such entity would be
liable for withholding taxes pursuant to Title 26 of the United States
Code.

The
term independent contractor shall mean any individual engaged in
regulated activities as an independent contractor pursuant to Title 26 of
the United States Code on behalf of either a mortgage broker, or mortgage
banker.

Applicants
for a license to engage in the business of mortgage banking and applicants
for registration as a mortgage broker shall provide a list of their
consultants at the time of application. A list of consultants must be filed with the Superintendent by the
licensee or registrant in such form as may be prescribed within ten days
of commencement of retainment. In addition, notification of the
termination of any consultant shall be made to the Superintendent within
10 days of such termination.

An
undertaking of accountability for each independent contractor must be
filed with the Superintendent by the licensee or registrant in such form
as may be prescribed within ten days of commencement of retainment. In addition, notification of the termination of any independent
contractor shall be made to the Superintendent within 10 days of such
termination.

A copy of the revised regulation including all
changes is on the Banking Department website.